Upon defendant Lee's motion, we on January 20, 2000 dismissed
Count 10 of the Superseding Indictment, which charged him with
bankruptcy fraud, 18 U.S.C. § 157(2). In that decision, we found
that, given the narrow construction that we are obliged to give
criminal statutes, especially unconstrued new ones, the language
and legislative history (such as it is) of the bankruptcy fraud
statute did not support a charge against Lee where his pertinent
filing with the bankruptcy court (1) post-dated the receipt of
the alleged fruits of the scheme to defraud*fn1, and (2) was
"concealing" only in the sense that the filing omitted reference
to the allegedly fraudulent receipt of funds.

We also noted that it would be improper, on the bare language
of the statute, to regard a bankruptcy filing under the
bankruptcy fraud statute in the same way a mailing is regarded
with respect to the mail fraud statute*fn2, and that it would
also be improper to criminalize an omission in a bankruptcy
filing in the same fashion that such an omission is penalized
by, for example, § 10b of the Securities Exchange Act of
1934.*fn3

With trial scheduled to have begun yesterday, the Government
late Friday afternoon, January 21, moved for reconsideration of
this decision.*fn4

First, it argues that legislative history and judicial
interpretation show that other fraud statutes*fn5 which were
passed after the mail fraud statute and which also contain the
"scheme or artifice" language are properly construed as broadly
as is the mail fraud statute*fn6, and that consequently the
new bankruptcy fraud statute should be construed broadly. The
Government also claims that Congress wants fraud statutes to be
construed broadly, as demonstrated by the use of similar "scheme
or artifice to defraud" language among various statutes and also
by Congress's history of passing new, broader legislation in
response to Supreme Court rulings which limited the scope of
various fraud statutes. Lastly, the Government notes the
similarity in the language between the bankruptcy fraud statute
and the various other fraud statutes places these statutes in
pari materia and demands that they be similarly construed.

Lee counters these arguments by first observing that because
the bankruptcy fraud statute is but one of a group of statutes
criminalizing various behaviors related to bankruptcy, see
18 U.S.C. § 151-157, it should be given a narrow construction. Lee
contrasts this with the mail fraud statute which, he avers,
stands alone and thus warrants broader construction. Lee further
argues that the Superseding Indictment does not allege a
sufficiently close relationship between the filing and the
alleged scheme, irrespective of whether the filing itself was
innocent and whether there was a scheme to defraud.*fn9 He
also contends that his alleged failure to disclose, in the
bankruptcy filing, the consulting fees paid to his then-fiancee
could not amount to criminally "concealing" anything.

While the Government's esprit de l'escalier is
well-articulated, after careful reflection we do not find that
the motion sets forth any reason for us to reverse ourselves.

As we discussed in our earlier Memorandum, in order to agree
with the Government and to find that Lee's alleged behavior
falls under 18 U.S.C. § 157(2), we either would have to apply in
this case the broad construction given, e.g., to the mail
fraud statute or, alternatively, would have to find that Lee's
non-disclosure in the bankruptcy filing puts him within the
statute's ambit. Similar though the language of the bankruptcy
fraud statute is to that of the various other fraud statutes, we
cannot, particularly as a matter of what appears to be first
impression, import wholesale into the bankruptcy fraud statute
the thick judicial gloss that has been applied over the years to
these other statutes.

As the Government concedes, there is nothing in the
legislative history of the bankruptcy fraud statute that even
hints that it is to be construed as broadly as the mail fraud
statute. The Government argues that this absence is immaterial
since, as discussed above, other fraud statutes are construed as
broadly as is the mail fraud statute. One might argue to the
contrary that, given that some other fraud statutes' legislative
histories do mention the mail fraud statute — see note 5,
supra — the absence of such reference in the bankruptcy fraud
statute's legislative history could just as easily mean that
Congress did not intend such an interpretation.*fn10

It would seem to us that the Government's argument puts the
cart before the horse — that construction should follow the
statute and not vice versa. And in this regard it is important
to recall that we are not here engaged in simply any exercise of
statutory interpretation. Because this is a criminal case, our
interpretation and construction of § 157 are constrained by the
due process safeguards owed to Robert Lee. As we discussed in
our January 20 Memorandum, the right to due process gives rise
to a "fair warning" requirement for criminal statutes: that the
defendant have "fair warning . . . in language that the common
world will understand, of what the law intends to do if a
certain line is passed. To make this warning fair, so far as
possible the line should be clear." United States v. Lanier,
520 U.S. 259, 117 S.Ct. 1219, 1224, 137 L.Ed.2d 432 (1997)
(quoting McBoyle v. United States, 283 U.S. 25, 27, 51 S.Ct.
340, 341, 75 L.Ed. 816 (1931)). One component of this need for
fair warning is the canon of strict construction of criminal
statutes, otherwise known as the rule of lenity, which directs
us to resolve ambiguity in a criminal statute so as to cover
only conduct clearly covered*fn12, see Lanier, 117 S.Ct. at
1225 (citing Liparota v. United States, 471 U.S. 419, 427, 105
S.Ct. 2084, 2089, 85 L.Ed.2d 434 (1985)). Another component is
the principle that "due process bars courts from applying a
novel construction of a criminal statute to conduct that neither
the statute nor any prior judicial decision has fairly disclosed
to be within its scope." Lanier, 117 S.Ct. at 1225 (citing,
e.g., Marks v. United States, 430 U.S. 188, 191-92, 97 S.Ct.
990, 992-93, 51 L.Ed.2d 260 (1977)).

The Government reasserts its argument that Lee's failure to
disclose the additional payments in his bankruptcy filing
constitutes "concealment" under 18 U.S.C. § 157.*fn13 At the
outset, it remains difficult, even after two motions and two
oral arguments on this point, to get one's hands around exactly
what the Government says is criminal here. As noted in our
January 20 Memorandum, it is not disputed that "there was a
lease and that Lee in fact received payments" in accordance with
it. Jan. 20 Mem. at 7. We learned at the second oral argument on
January 24 that Ali paid the commission to the fiancee (at last
identified as Donna Pointer) out of Ali's twenty percent share
of the Medicare payments; the eighty percent share of the
debtor, Ostomy, was not in the slightest diminished. Ms.
Pointer, who was not married to Lee at the time of the payments,
should not be presumed to be Lee's marionette, and to the extent
she won handsome payments from Ali this is, on its face, merely
evidence of capitalism at work and not crime. At all events, Ms.
Pointer was not an officer of Ostomy and owed no direct duty to
any Ostomy creditor.

But why limit this incorporation to the jurisprudence under
the mail and wire fraud statutes?

The essence of the Government's argument is that the formula
"scheme or artifice to defraud" constitute magic words meaning
"mail and wire fraud statutes." The Government ignores the fact
that those very words also appear in the statutes dealing with:

As the Government concedes, unlike the bank fraud statute, cited
in note 5, supra, Congress in the Bankruptcy Reform Act of
1994 gave no direction at all as to which of these many statutes
we should look. There is no principled way we can look only to
the mail fraud statute but ignore, say, the jurisprudence under
the Commodity Exchange Act that antedates the mail fraud statute
by twenty-six years. Indeed, as we pointed out on January 20,
the closest statutory cognate to what the Government charges
here is § 10b of the Securities Exchange Act (and especially SEC
Rule 10b 5 promulgated thereunder) which antedates the mail
fraud statute by twelve years.

Because there is no limiting principle to the Government's
magic language incorporation argument, the Government's approach
would present any district judge with insuperable trial
management problems in prosecutions under § 157. At the first
utterance of a relevancy objection to a question or proffered
document, to what body of law under what cognate statute should
judges look for guidance? When it comes time to charge the jury,
to what body of appellate cases should judges look for the
elements of the offense?

Analysis of the 1994 legislation as a whole also belies the
Government's inclusive and expansive reading. 18 U.S.C. § 157
was added to the United States Code in 1994, as part of the
Bankruptcy Reform Act of 1994, Pub.L. No. 103-394, 108 Stat.
4106. This was substantial legislation*fn15 addressing a wide
variety of bankruptcy issues. Of interest to us is Section 312,
which contains amendments and additions to the crimes associated
with bankruptcy. These crimes are codified in Chapter 9 of Title
18 of the United States Code, and comprise §§ 151-157. The
Bankruptcy Reform Act of 1994 not only added §§ 156 ("Knowing
disregard of bankruptcy law or rule") and 157 ("Bankruptcy
fraud"), but made amendments as to either form or content of §§
152 ("Concealment of assets; false oaths and claims; bribery"),
153 ("Embezzlement against estate"), and 154 ("Adverse interest
and conduct of officers").*fn16

The statutory scheme as a whole thus fortifies our reading of
this 1994 law under the canon of strict construction, and our
rejection of the Government's expansive magic language
incorporation approach. Absent clearer direction from Congress,
we shall not import mail and wire fraud jurisprudence to
criminalize Lee's post hoc nondisclosure.

ORDER

AND NOW, this 25th day of January, 2000, upon consideration of
the Government's motion for reconsideration, defendant's
response, and after oral argument on January 24, 2000, and for
the reasons set forth in the accompanying Memorandum, it is
hereby ORDERED that the Government's motion is DENIED.

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